I'm supposed to write a follow up to my post on appealing your Cook County property taxes but then an email hit my inbox from Trulia entitled 4 Statistics that Win Listings and it got me all riled up. It's supposed to be advice from Trulia (whose real customers are real estate agents but that's a topic for another post) on how realtors can get home sellers to choose them to sell their homes and it proceeds under the premise that realtors should feed consumers numbers that demonstrate their ability to sell homes. The only problem is that the statistics they focus on tell you absolutely nothing of the sort and as long as you are dealing with top quality (different from top producer) realtors there really isn't much difference in their ability to sell homes.
One of the many dirty little secrets of the real estate industry is that real estate agents' ability to sell themselves is much greater than their ability to sell homes and the most successful agents in this business are just really good at selling themselves. (Of course, they can't be bad at selling homes and that is actually a problem for many in this industry.) Unfortunately, the way many agents sell themselves is by throwing around variations of these statistics. See my prior post: How Realtors Lie To Get Your Business.
Yeah, I've written about this from a few different angles before. In fact the subject of these bogus statistics came up recently in the context of Realtor.com abandoning their AgentMatch program to rank agents on these types of statistics. After a huge blowback from their own membership they finally admitted that these statistics don't tell you much and they threw in the towel. Yet, you will still see a liberal display of these statistics in many listing presentations.
When choosing a realtor to sell your home you need to be aware of the subtleties of the business. So, here is a summary of the statistics that Trulia is talking about and the issues with focusing on them:
- List price to sell price ratio: Price your listings low enough and you can make this ratio look awesome! Interestingly enough the Trulia article points out how consumers are increasingly skeptical about this number.
- Days on the market: Same trick, not to mention that the market is so hot now that days on the market have plummeted across the board.
- Average number of offers on listings: Same trick again. Some agents essentially auction off properties by pricing them so low that they solicit many offers and go under contract in 3 days. The problem with this is that there are a whole group of buyers that may have been willing to pay more that don't even get a chance to bid on it. Not smart at all.
- Close rate - the percentage of listings that end up closing: Sounds good on the surface but some realtors - and it's usually the most successful ones - cherry pick their listings. They don't take on the challenging ones. So their close rates look great and they make a lot more money. It's like looking at hospital mortality rates - the best hospitals may actually have higher mortality rates because really sick patients tend to flock there.
The sad truth is that home sellers want to believe that if they pick the right realtor they are going to sell their home faster and for more money and the most successful realtors in the business often take advantage of this desperate desire by pretending that they can deliver on this. At the end of the day it's a confidence game and we all know how being good at the confidence game can net you a lot of money (Bernie Madoff, Jordan Belfort). But the way that home sellers can level the playing field is by focusing on what a realtor is going to DO for them. If a realtor is claiming to have magical powers then ask them to explain what they are going to do differently than everyone else that makes them able to deliver on the promise and what are they going to charge you for doing that. I guarantee there are no magical powers in this business and two agents doing the exact same things with the same quality of execution are going to get the exact same result.
If you would like to hear me spill more of the dirty secrets about using realtors to sell your home I'm actually going to be holding a free seminar on the subject next week, February 19 at 6:30 in University Village: Secrets To Smart Home Selling. Demystifying The Sale Process. I will also be providing an overview of the 2013 Chicago housing market and the outlook for 2014.
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